To safeguard clients’ funds, capital markets regulator Sebi on Thursday came out with a framework that requires the upstreaming of all client funds received by stock brokers to clearing corporations.
Under the framework, no clients’ funds will be retained by stock brokers on an end-of-day (EoD) basis. Further, clients’ funds will be upstreamed by stock brokers and clearing members to clearing corporations (CCs) only in the form of either cash, lien on Fixed Deposit Receipt (FDR) or pledge of units of mutual fund overnight schemes, Sebi said in a circular.
Other than the FDRs (liened to CCs) and mutual fund overnight scheme (pledged to CCs), any remaining client funds with brokers will be upstreamed to a CC before a stipulated cut-off time.
The new framework will come into effect from July 1, 2023, the Securities and Exchange Board of India (Sebi) said.
With regards to upstreaming through FDRs created out of clients’ funds, Sebi said stock brokers may create FDRs out of clients’ fun
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